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What is HRM?

Today HRM which is a very significant functional field of organizational management has evolved a very broad & profound management branch. It is HRM that deals with management of HR in an organization. It is a human side of organizational management or Business Administration. HRM is also called by alternative names such as personnel management (PM), manpower management, people management & staff management. Some studies indicate that PM differs from HRM.

Efficient utilization of HR means optimum use of employees by eradicating (or minimizing) wastage. It denotes utilizing the right employees in the right number at the right cost.

Effective utilization of HR refers to use HR for organizational effectiveness, which is extent to which goals of organization have been realized.

Definition of HRM

HRM is defines as a strategic & coherent approach management of an organization’s most valued assets – the people working there who individually & collectively contribute to achievement of its objectives.

HRM is the efficient and effective utilization of HR to achieve goals of an organization.

Means an economic & social entity composed of group of people who interact with each other for the purpose of achieving a common goal.

HRM can result in acquiring core competency of organization & develop competitive advantage.


Policy Goals of HRM


1. Managing people as assets that are fundamental to the competitive advantage of the orgn.

2. Aligning HRM policies with business policies and corporate strategy.

3. Developing a close fit of HR policies, procedures and systems with one another.

4. Creating a flatter and more flexible organization capable of responding more quickly to  change.

5. Encouraging team working and co-operation across internal organizational boundaries.

6. Creating a strong customer-first philosophy throughout the organization.

7. Empowering employees to manage their own self-development and learning.

8. Developing reward strategies designed to support a performance-driven culture.

9. Improving employee involvement through better internal communication.

10. Building greater employee commitment to the organization.

11. Increasing line management responsibility for HR policies.

12. Developing the facilitating role of managers as enablers.




Organization resources

Physical resources                                         Human resources

Money, machine, material, methods,              capacity to improve, capacity to upgrade,       information, time                                           innovative, capacity for team work


What are the aims of HRM?

The overall purpose of human resource management is to ensure that the organization is able to achieve success through people. Specifically, HRM is concerned achieving objectives in the areas summarized below.


1. Acquire organizational effectiveness

Distinctive human resource practices shape the core competencies that determine how firms compete. HRM strategies aim to support programmes for improving organizational effectiveness by developing policies in such areas as knowledge management, talent management and generally creating ‘a great place to work’. HR strategies can be concerned with the development of continuous improvement & customer relations policies.


2. Human Capital Management

The human capital of an organization consists the people who work there & on whom the success of the business depends.

Human capital – represent the human factor in the organization

  • Combined intelligence
  • Skills
  • Expertise


3. Human element of an organization

  • Capable of learning
  • Changing
  • Innovating
  • Providing the creative

HRM aims to ensure that the organization obtains & retains the skilled, committed & well – motivated workforce it needs. This means taking steps to assess & satisfy future people needs & to enhance & develop the inherent capacities of people – their contributions, potential & employability – by providing learning & continuous development opportunities.


4. Knowledge management

Knowledge management is ‘any process or practice of creating, acquiring, capturing, sharing and using knowledge, wherever it resides, to enhance learning and performance in organizations’ HRM aims to support the development of firm-specific knowledge and skills that are the result of organizational learning processes.


5. Reward management

HRM aims to enhance motivation, job engagement and commitment by introducing

policies and processes that ensure that people are valued and rewarded for what they

do and achieve and for the levels of skill and competence they reach.

6. Employee relations

The aim is to create a climate in which productive and harmonious relationships can

be maintained through partnerships between management and employees and their

trade unions.


7. Meeting diverse needs

HRM aims to develop and implement policies that balance and adapt to the needs of

its stakeholders and provide for the management of a diverse workforce, taking into

account individual and group differences in employment, personal needs, work style

and aspirations and the provision of equal opportunities for all.


The challenge to HRM


  • Globalization

which requires organizations to move people, ideas, products and information around the world to meet local needs. New and important ingredients must be added to the mix when making strategy: volatile political situations, contentious global trade issues, fluctuating exchange rates and unfamiliar cultures.


  • Profitability through growth

The drive for revenue growth means that companies must be creative and innovative and this means encouraging the free flow of information and shared learning among employees.


  • Intellectual capital

This is the source of competitive advantage for organizations. The challenge is to ensure that firms have the capability to find, assimilate, compensate and retain human capital in the shape of the talented individuals they need who can drive a global organization. They have also to consider how the social capital of the organization – the ways in which people interact – can be developed. Importantly, organizations have to focus on organizational capital – the knowledge they own and how it should be managed.


  • Change, change and more change

The greatest challenge companies face is adjusting to – indeed, embracing – non-stop change. They must be able to ‘learn rapidly and continuously, and take on new strategic imperatives faster and more comfortably’.


  • Social challenge

Maintaining a diverse work force within the legal, cultural, and ethical framework is a significant challenge.


  • The quality challenge

Key to organizational success today is providing high quality products & services to customers. The most crucial inputs are HR that lives in a quality culture & technology.


  • High performing work system challenge

Organizations can grow only with high performing work systems and processes, where the work forces diversify and specialization are challenging factors.


  • Economic and political challenge

Organizations operate in a deregulated environment where the market is allowed to function on a customer demand basis and many regulations are removed. Second is the regional and international trade agreements that have changed opportunity scenario for firms.


  • Diversify & empowerment challenge

More and more jobs demand highly specialized skills that tend to have a set of highly diversified and difficult to find people. They have a high bargaining power.


Human capital management

Human capital management (HCM) is concerned with obtaining, analysing and reporting on data that informs the direction of value-adding people management, strategic investment and operational decisions at corporate level and at the level of front line management. HCM involves the systematic analysis, measurement and evaluation of how people policies and practices create value.


Nalbantian et al (2004) defined as

human capital as, ‘The stock of accumulated knowledge, skills, experience, creativity and other relevant workforce attributes’ and suggest that human capital management involves




According to Kearns, in HRM ‘the HR team is seen as a support service to the line’ – HR is based

around the function and the HR team performs ‘a distinct and separate role from other functions’. Conversely, ‘HCM is clearly seen and respected as an equal business partner at senior levels’ and is ‘holistic, organization-wide and systems-based’ as well as being strategic and concerned with adding value.






Definition by Bontis et al (1999)

Human capital represents the human factor in the organization; the combined intelligence, skills and expertise that gives the organization its distinctive character. The human elements of the organization are those that are capable of learning, changing, innovating and providing the creative thrust which if properly motivated can ensure the long-term survival of the organization.




  • Intellectual capital

The concept of human capital is associated with the overarching concept of intellectual capital, which is defined as the stocks and flows of knowledge available to an organization. These can be regarded as the intangible resources associated with people who, together with tangible resources (money and physical assets)


  • Social capital

Social capital is another element of intellectual capital. It consists of the knowledge derived from networks of relationships within and outside the organization. It is necessary to capture individual knowledge through knowledge management processes,

  • Organizational capital

Organizational capital is the institutionalized knowledge possessed by an organization, which is stored in databases, manuals


The significance of human capital theory


The added value that people can contribute to an organization is emphasized by human capital theory. It regards people as assets and stresses that investment by organizations in people will generate worthwhile returns. Human capital theory proposes that sustainable competitive advantage is attained when the firm has a human resource pool that cannot be imitated or substituted by its rivals.



Human capital theory views that an organization rich in human capital will gain a competitive advantage by being difficult to imitate, gaining highly evolved processes such as cross Department Corporation and executive development.



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